What is Overdraft Account?
Overdraft Account is a one-of-a-kind credit facility allotted to you for a specified amount. Once this amount is assigned, you are free to withdraw and use any amount of money within this allowed limit. But, the part which sets this product apart from Personal Loans and other forms of financing is that you only pay interest on the amount that you withdraw. This is a loan where you only pay the interest amount as EMI.
Overdraft Facility Features
- Low interest rates: Unlike other forms of financing, where you start paying interest on the principal irrespective of usage, the personal line of credit calculates interest on only the amount that you withdraw, which may be significantly lower.
- Lower instalments: Since you don’t start paying interest charges until you use the loan, the instalments are likely to be of a much smaller amount.
- No collateral: Line of credit is one of the few financing avenues that require no proof of your assets or collateral against the loan amount.
- No EMI: Overdraft is one of the few financing avenues where you will only pay the interest amount as EMI.
- No hidden costs: You are not expected to pay any fees for the withdrawals you make. There are no limits on the numbers of times you can make withdrawals either.
Interested for Same kind of Saving in Amount on Interest or Savings
Documents Required to Process the Overdraft AccountFor Overdraft Account, different banks and NBFC’s requires different documents for verification that proves the authenticity of the borrower. Following are an overview of the documents generally asked while applying for an Overdraft Facility:
- Identity Proof – PAN / Aadhaar / Voter ID / Driving License / Passport Copy.
- Current Address Proof – Driving license/ Passport Copy/ Latest Gas Bill with Gas Bond / Latest Property Tax Bill / Bank Passbook / Ration Card.
- Age Proof – Pan Card / Aadhaar Card / Voter ID card / Passport Copy / Any Other Statutory authority Certificat.
- Bank Statement – Latest 3 Months Bank Statement required.
- Company ID – For Employment Proof.
- Salary Payslips – Last 3 Months.
- Photo Copy – One Passport Size Photo.
Eligibility Criteria for Overdraft Facility
For Overdraft Facility, eligibility will differs bank to bank. The eligibility will also gets differs with requirements and needs. Below are eligibility criteria to get an online Overdraft facility approval for salaried and self-employed individuals are listed:
- Age – Minimum 23 years – Maximum 60 years.
- Employement – You must be Salaried Employee.
- Company – Company must be 2-3 years MCA registered.
- Bank Account – Should Have An Active Bank Account.
- Income – Stable employment with regular income of >= 40,000/PM in active bank account.
- CIBIL Scores – Should have a decent and good Credit Record*.
Difference between Overdraft Facility and Regular LoanAny indivisual who is in search of urgent funds from banks should know that Overdraft Facility is best option. It is difficult decide whether Normal Loan is best or Overdraft facility is best, the below information clears the difference between Normal Loan and Overdraft Facility:
- Funds Withdrawal: – An overdraft facility is a form of credit which is offered to an Salaried individual based on a current account. In addition, the amount which is withdrawn varies depending on the customer’s requirement. However, a regular loan talks about a fixed amount which is borrowed from a specific bank highlighting a stated repayment duration.
- Rate of Interest: – Considering an overdraft, the rate of interest is charged specifically on the borrowed overdraft amount and not on the stated limit; however, for a regular loan, the rate of interest is applied on the whole amount borrowed, regardless if it is completely utilized or not.
- Duration: – An overdraft is accessed for a lesser duration and the candidate isn’t allowed to borrow large amounts due to limits on credit. On the other hand, a loan is accessible for a longer period, ranging from 3 to 5 years, with the availability to take large sums.
- Flexible Repayment: – Overdraft Account is flexible to repayment. You can call it more flexible when considering the payment scheme, this payment option would be made possible in a lump sum which can be shut anytime. With regular loans, EMIs are involved that need to be paid on a schedule. If the EMI payments are not made timely, it can harm the customer’s credit ratings..
Why opt for an Overdraft Facility?
- EMI: – Pay EMI only on the amount used.
- Quick Process: – Quick Disbursal within 48 Hours of Application.
- Collateral Free: – Unsecured Loans that are absolutely collateral-free
- Fund Utilization: – Utilize funds for any purpose without any regulation from the Lender.